GUIDELINES ON THE MINIMUM CONTENTS REQUIREMENTS FOR TRUST...

Guidelines On Minimum Contents Requirements For Trust Deeds

1

Suruhanjaya Sekuriti

Securities Commission

GUIDELINES ON THE MINIMUM CONTENTS REQUIREMENTS FOR

TRUST DEEDS

1st July 2000


2

Index No. Section

Page No.

1. Introduction 1

2. Interpretation 2

3. Scope 2

4. Preamble and Recitals 3

5. Description of Debentures 4

6. Interest or Profit Rate 4

7. Covenant to comply with Trust deed and Debentures 5

8. Borrower’s Covenant to Pay 5

9. Taxation 5

10. Debenture Certificates 6

11. Limitation on Borrowing 6

12. Events constituting default and remedy of such default 7

13. Sinking Fund 9

14. Covenants by the Borrower 9

15. Issue of Shares in relation to Convertible Debentures 11

16. Reporting Covenants by the Borrower 12

17. Application of Moneys received in respect of Debentures 13

18. Power to withhold, invest and accumulate 14

19. Deposit of Unclaimed Moneys 14

20. Power and Duties of Trustee 14

21. Relief, Exemption and Indemnification of Trustee from Liability 16

22. Meetings 16

23. Miscellaneous Clauses 17

24. Schedules 18

Appendix 1 19


3

1. Introduction 1.1 With effect from 1st July 2000, the new provisions under Division 4 of

Part IV of the Act alter the present regulatory scheme for trust deeds

in a number of ways:

• Where a debenture issue, offer or invitation is made by any

corporation (including public or private limited companies),

there is now a positive requirement for such issue, offer or

invitation to have a trust deed; and

• These Guidelines provide for the minimum contents

requirements for such trust deed.

1.2 The requirements as stipulated under these Guidelines are in addition

to all requirements imposed on a borrower, guarantor and trustee

under the law which includes the provisions of the Act. It is not

intended for these Guidelines to derogate from any requirement of the

law.

1.3 These Guidelines seek to strengthen protection given to debenture

holders. However, they do not seek to impose worded clauses in any

trust deed in relation to debentures. Therefore, parties are free to

determine additional provisions, covenants or terms and conditions of

debentures and/or trust deeds over and above that which is stipulated

in these Guidelines.

1.4 Listed corporations should additionally comply with such requirements

pertaining to trust deeds as may be required by rules of any Malaysian

stock exchange.


4

2. Interpretation 2.1 In these Guidelines unless the contrary is expressly stated, the

following words have the following meanings:

“Act” means the Securities Commission Act 1993;

“debenture” has the same meaning as in section 2 of the Act;

“borrower” has the same meaning as in section 2 of the Securities

Commission Act 1993. In the case of Islamic debentures, the term

“borrower” in these Guidelines refers to the entity who receives

proceeds or money from the debenture issue, offer or invitation.

“FAST means the Fully Automated System for Tendering;

“RENTAS” means Real Time Electronic Transfer of Funds and Securities

System.

3. Scope 3.1 Pursuant to section 67 of the Act, any person who proposes to issue,

offer for subscription or purchase, or issue an invitation to subscribe

for or purchase, debentures, must enter into a trust deed that meets

the requirements of section 68 of the Act and these Guidelines.

3.2 These Guidelines do not apply to any issue of, offer for subscription or

purchase of, or invitation to subscribe for or purchase, debentures as

specified in Schedule 4 of the Act which is attached as Appendix 1 for

ease of reference.

3.3 For purposes of these Guidelines, where relevant, parties may

negotiate for references to borrower to include references to its


5

subsidiaries where the affairs of its subsidiaries may impact on the

ability of the borrower to repay amounts payable under the

debentures.

3.4 Where any provision stated in the Guidelines is based on a test of

“materiality”, that test shall be decided upon by the relevant parties.

4. Preamble and Recitals

4.1 The following must be provided for in the preamble and recitals of the

trust deed in relation to the issue of, offer for subscription or purchase

of, or an invitation to subscribe for or purchase, debentures:

(i) the identities of the parties to the trust deed;

(ii) a brief description of the debentures including the amount and

maturity of the debentures as well as the interest or profit rate

(where applicable);

(iii) a statement confirming that the relevant board and/or

shareholders’ resolution(s) and regulatory approvals have been

obtained;

(iv) the date of issue/proposed issue for the debentures and

whether the debentures will be issued/tendered under FAST

and/or RENTAS.


6

5. Description of Debentures

5.1 The trust deed or the terms and conditions of the debentures must

provide for the following:

(i) the key features of the debentures constituted by the trust deed

including the interest or profit rate (where applicable), the

maturity date or redemption schedule, and the denomination of

the debentures (where applicable);

(ii) details of the central depository and paying agent for the

debentures;

(iii) whether the debentures are secured or unsecured and if

secured, the nature of the security;

(iv) the ranking of the holders of debentures amongst all other

holders of the debentures and as against all other obligations of

the borrower.

6. Interest or Profit Rate

6.1 Where provision is made for the payment of an interest or profit rate

under the debentures, the trust deed or the terms and conditions of

the debentures, should state:

(i) the interest or profit rate (where applicable) payable on the

debentures and the frequency upon which such interest

payments are required to be made;


7

(ii) the conditions under which the stipulated interest or profit rate

(where applicable) and its payment terms may change; and

(iii) where a default interest or profit rate (where applicable) has

been agreed upon by the parties to the trust deed, to state the

rate payable on any overdue amounts.

7. Covenant To Comply with Trust Deed And Debentures

7.1 The trust deed must provide for a covenant by the borrower to comply

with the provisions of the trust deed and the terms and conditions of

the debentures.

8. Borrower’s Covenant To Pay

8.1 The trust deed must provide for a covenant by the borrower to redeem

in full all outstanding debentures in accordance with the terms and

conditions of the debentures;

8.2 Where the borrower has an option to redeem the debentures before

the maturity date of such debentures, the trust deed must provide for

a clause setting out the conditions and the procedure by which such an

option can be exercised.

9. Taxation

9.1 In the event of any withholding of taxes required or being

subsequently required by law in respect of any payment to be made

pursuant to the terms and conditions of the debentures, the trust deed


8

should state what is the obligation of the borrower with regard to such

withholding.

10. Debenture Certificates

10.1 In the case of scripless debentures, the trust deed or the terms and

conditions of the debentures should provide for the following:

(i) details and particulars relating to the global certificate

representing the debentures;

(ii) the conditions under which the trustee may exchange the global

certificate with definitive certificates.

10.2 In the case of debentures in scrip-based form, there should be

provision for the manner in which a worn out, defaced, lost, stolen,

mutilated or destroyed certificate should be replaced by the borrower

or any agent on behalf of the borrower and the fee payable, where

applicable.

11. Limitation on Borrowing

11.1 Where the parties agree that there should be a provision for limitation

on the borrowings of a borrower, the trust deed should state:

(i) whether there is a limitation on the total amount of borrowings

by the borrower; and

(ii) whether the borrower has any right to create additional charges

over any of its assets and the priority of ranking of such


9

charges, and if there is such a right, details of its nature and

extent.

12. Events constituting default and remedy of such default

12.1 The trust deed and the terms and conditions of debentures must

provide for, but should not be limited to, the following:

(i) a list of all events, the occurrence of any of which would entitle

or oblige the trustee to declare the debentures immediately due

and repayable (to the extent appropriate and subject to any

materiality thresholds and provision for remedy or period of

grace which may be negotiated) including the following:

• where there is any default in payment of any principal,

premium or interest or profit rate (where applicable)

under the debentures;

• where a winding up order has been made against the

borrower or a resolution to wind up the borrower has

been passed;

• where a scheme of arrangement under section 176 of the

Companies Act 1965 has been instituted against the

borrower;

• where a receiver has been appointed over the whole or a

substantial part of the assets of the borrower;

• where there is a breach by the borrower of any term or

condition in the debentures or provision of the trust deed


10

or of any other document relating to the issue, offer or

invitation in respect of the debentures;

• where any other indebtedness of the borrower becomes

due and payable prior to its stated maturity or where the

security created for any other indebtedness becomes

enforceable;

• where there is a revocation, withholding or modification

of a licence, authorisation or approval that impairs or

prejudices the borrower’s ability to comply with the terms

and conditions of the debentures or the provisions of the

trust deed or any other document relating to the issue,

offer or invitation in respect of the debentures.

(ii) the powers of the trustee upon the occurrence of any event

described in subparagraph (i) including:

• the powers of the trustee to declare the debentures

immediately due and repayable;

• the powers of the trustee to enforce the provisions of the

trust deed;

• the circumstances under which the trustee shall be bound

to enforce the provisions of the trust deed; and

• the circumstances under which the holders of the

debentures are entitled to pursue their rights and

remedies.


11

13. Sinking Fund

13.1 Where the parties agree to the maintenance of a sinking fund, the

trust deed should provide for:

(i) the obligation to maintain an interest bearing account, or in the

case of Islamic debentures – an Islamic based account, and to

state the holder(s) and operator(s) of the account;

(ii) the amounts to be paid into the account and the dates such

payments are required to be made;

(iii) the conditions under which the moneys in the account may be

withdrawn by the borrower; and

(iv) the conditions under which the moneys in the account may be

used or applied by the trustee or the borrower.

14. Covenants by the Borrower

14.1 As a minimum, the trust deed must provide for the following covenants

of the borrower:

(i) that the borrower will give to the trustee any information which

the trustee may require in order to discharge its duties and

obligations as trustee under the trust deed relating to the

borrower’s affairs to the extent permitted by law;

(ii) that the borrower will exercise reasonable diligence in carrying

out its business in a proper and efficient manner which should


12

ensure, amongst others, that all necessary approvals or relevant

licences are obtained;

(iii) that the borrower will not enter into a transaction, whether

directly or indirectly with interested persons (including a

director, substantial shareholder or persons connected with

them) unless -

(a) such transaction shall be on terms that are no less

favourable to the borrower than those which could have

been obtained in a comparable transaction from persons

who are not interested persons; and

(b) with respect to transactions involving an aggregate

payment or value equal to or greater than an agreed

sum, the borrower obtains certification from an

independent adviser that the transaction is carried out on

fair and reasonable terms; PROVIDED

that the borrower certifies to the trustee that the transaction

complies with paragraph (a), that the borrower has received the

certification referred to in paragraph (b) (where applicable) and

that the transaction has been approved by the majority of the

board of directors or shareholders in a general meeting as the

case may require;

(iv) to maintain a paying agent in Malaysia;

(v) to procure that the paying agent shall notify the trustee in the

event that the paying agent does not receive payment from the

borrower on the due dates as required under the trust deed and

the terms and conditions of the debentures;


13

(vi) to keep proper books and accounts at all times and to provide

the trustee and any person appointed by it (e.g. auditors)

access to such books and accounts.

15. Issue of Shares in relation to Convertible Debentures

15.1 In the case of convertible debentures, the trust deed or the terms and

conditions of the debentures must state:

(i) the terms of conversion;

(ii) where the borrower reserves the right to issue shares or other

securities to shareholders or to any other persons for cash or as

a bonus distribution or otherwise, that the holders of the

debentures must have either participation rights in respect of

such issue or provision must be made for an appropriate

adjustment of the conversion price to ensure that the

conversion privilege of the debenture holder is not diluted;

(iii) if the holders of the debentures have any right to convert the

debentures into shares in the event of a take-over offer in

relation to the borrower, or how the holders of the debentures

might participate in such a take-over offer;

(iv) the conditions under which a borrower has an option, if any, to

convert the debentures into shares of the borrower and the

rights of debenture holders when such an option is exercised;

(v) provisions for the adjustment of the conversion price in the light

of any changes to the borrower’s share capital;


14

(vi) the ranking of the shares arising from the conversion of the

debentures.

16. Reporting Covenants by the Borrower

16.1 The trust deed should provide for covenants to ensure that the

borrower shall immediately notify the trustee in the event that the

borrower becomes aware:

(i) of any event of default or that such other right or remedy under

the terms, provisions and covenants of the debentures and trust

deed have become immediately enforceable;

(ii) of any circumstance that has occurred that would materially

prejudice the borrower, its guarantors (where applicable) or any

security included in or created by the debentures or the trust

deed (where applicable);

(iii) of any substantial change in the nature of the business of the

borrower or its guarantors (where applicable);

(iv) of a change in the name of the guarantors (where applicable);

(v) of any cessation of liability of guarantors (where applicable) for

the payment of the whole or part of the moneys for which they

were liable under the guarantee;

(vi) of any change in witholding tax position or taxing jurisdiction of

the borrower (where applicable);


15

(vii) of any change in the utilisation of proceeds from the debentures

where the prospectus, information memorandum or any

agreement entered into in connection with the issue, offer or

invitation sets out a specific purpose for which proceeds are to

be utilised;

(viii) of any other matter that may materially prejudice the interests

of debenture holders.

16.2 The trust deed should provide for a covenant by the borrower to send

to the trustee the annual audited accounts of the borrower within a

stipulated timeframe and any other accounts, report, notice, statement

or circular issued to shareholders.

16.3 The trust deed should provide for a covenant by the borrower to

provide to the trustee at least annually, a certificate that the borrower

has complied with its obligations under the trust deed and the terms

and conditions of the debentures and that there did not exist or had

not existed, from the date the debentures were issued or date of the

previous certificate as the case may be, any event of default and if

such is not the case, to specify the same.

17. Application of Moneys received in respect of the Debentures

17.1 Where there are any moneys received by the trustee under the trust

deed, the trust deed should provide for the manner and order of

priority in which these amounts are applied or payable.


16

18. Power to withhold, invest and accumulate

18.1 Where there is any discretion by the trustee to withhold, invest and

accumulate moneys it receives, this must be stated in the trust deed.

18.2 Where the trustee is allowed to invest any moneys received by the

trustee, the conditions under which it is permitted to do so and the

types of investment the trustee is permitted to invest in must be stated

in the trust deed.

19. Deposit of Unclaimed Moneys

19.1 There must be a provision with regard to the rights and obligations of

the parties in relation to any unclaimed moneys due to the debenture

holders.

20. Powers and Duties of Trustee

20.1 The trust deed should contain a statement by the trustee that it is

duly qualified to act as trustee under the Act.

20.2 The trust deed should set out provisions relating to the powers of the

trustee. These should include the following:

(i) the matters which are within the powers of the trustee to decide

without reference to the holders of the debentures;

(ii) where there is a breach by the borrower under the terms and

conditions of the debentures and the provisions of the trust

deed, the circumstances that the trustee may authorise or waive

such breach provided:


17

(a) it is satisfied that there is no material prejudice to the

debenture holders’ interests or any security for the

debentures; or

(b) it is authorised to do so by resolution of a stipulated

majority of debenture holders.

(iii) the fees to be paid to the trustee for the performance of its

duties as trustee and any additional services it may provide;

(iv) any indemnity given by the borrower to the trustee;

(v) the circumstances in which the trustee may delegate its powers;

(vi) whether or not the trustee is bound to disclose any confidential

or other information made available to the trustee by the

borrower or guarantor (where applicable) in connection with the

trust deed;

20.3 The trust deed should provide for provisions relating to the duties of

the trustee which should include the following:

(i) a duty to exercise reasonable diligence to ascertain, based on

the accounts, reports, certificates, circulars or opinions furnished

to the trustee, whether the borrower or each guarantor (where

applicable) has committed any breach of the terms and

conditions of the debentures or provisions of the trust deed or

whether an event of default has occurred or is continuing;

(ii) in the case where an event of default has occurred and is

continuing, the trustee shall exercise such rights and powers


18

vested in it by the trust deed and use a reasonable degree of

skill and diligence in exercising such rights and powers.

21. Relief, Exemption and Indemnification of trustee from liability

21.1 There should be a provision in the trust deed that states that no

provision or covenant in the trust deed or the terms and conditions of

the debentures should be construed as relieving, exempting or

indemnifying a trustee from liability for breach of trust or for failure to

show a degree of care and diligence required of it as trustee.

22. Meetings

22.1 There should be a provision in the trust deed setting out the notice

period for the meeting of debenture holders.

22.2 There should be a provision in the trust deed stating that the meetings

may be convened at the request of the issuer, trustee or an agreed

percentage of debenture holders.

22.3 There should be a quorum requirement for the transaction of business

at the meetings. The quorum for the passing of special resolutions

should be explicitly stated.

22.4 There should be a provision in the trust deed that debentures held by

the borrower or any related corporation of the borrower shall not be

counted for purposes of voting.


19

23. Miscellaneous clauses

23.1 The trust deed should provide for the following:

(i) the conditions under which the provisions of the trust deed or

the terms and conditions of the debentures may be modified;

(ii) the mode of service of notices and other documents on the

borrower, the trustee and the holders of the debentures, which

should include a provision for the trustee to notify debenture

holders by way of a notice published in national newspapers in

the main languages, published daily and circulating generally

throughout Malaysia;

(iii) the borrower to be responsible for paying any stamp duty on

the trust deed or the debentures (if applicable);

(iv) that the governing law is Malaysian law;

(v) where the trustee company merges or converts, provision must

be made for the new entity to be its successor under the trust

deed or for the appointment of another trustee, provided that in

either case they are qualified to act as trustee and that the

approval of a stipulated majority of debenture holders is

obtained.

(vi) the conditions for the appointment, resignation and removal of

the trustee, which should ensure that –

(a) any removal of a trustee and subsequent appointment of

a replacement trustee by the borrower must be with the

consent of an agreed majority of debenture holders; and


20

(b) the borrower is notified of any removal of a trustee and

subsequent appointment of a replacement trustee by

debenture holders.

24. Schedules

24.1 There should be schedules to provide for the following:

(i) the form and the terms and conditions of the global certificate

representing the debentures;

(ii) the form and the terms and conditions of the definitive

certificate representing the debentures;

(iii) the provisions regulating the convening and holding of meetings

of the holders of debentures.


21

Appendix 1

Issues, Offers or Invitations under Schedule 4 of the Act • An issue of, offer for subscription or purchase of, or invitation to

subscribe for or purchase, debentures made by the Federal or any State Government or any statutory body.

• An issue of, offer for subscription or purchase of, or invitation to

subscribe for or purchase, debentures guaranteed by the Federal Government or the Central Bank of Malaysia.


subscribe for or purchase, debentures which by their terms may only be held by members of the issuer.


subscribe for or purchase, debentures which by their terms may only be held by a single holder of those debentures.


subscribe for or purchase, debentures made in relation to trades in securities effected on a stock market of a stock exchange which is approved by the Minister pursuant to subsection 8(2) of the Securities Industry Act 1983.


subscribe for or purchase, debentures in respect of trades in debentures effected in the money market.


subscribe for or purchase, debentures made pursuant to a scheme of arrangement or compromise under section 176 of the Companies Act 1965 or a restructuring scheme under the Pengurusan Danaharta Nasional Berhad Act 1998.


subscribe for or purchase, debentures made by or to Danamodal Nasional Berhad.


subscribe for or purchase, debentures made exclusively to persons outside Malaysia.


22

• An issue of, offer for subscription or purchase of, or invitation to subscribe for or purchase, debentures to existing members of a company within the meaning of section 270 of the Companies Act 1965.

Date post:	21-Jun-2018
Category:	Documents
Upload:	donhi
View:	218 times
Download:	0 times

GUIDELINES ON THE MINIMUM CONTENTS REQUIREMENTS FOR TRUST...

Documents